Lying About the South Pole, and Improving Your Credit Score

If you’re going to beat someone else to the South Pole, don’t tell anyone.

In 1910, two groups attempted to reach the South Pole- and become the first people in history reach the pole. As this great podcast explains, one large, well-funded group was led by Robert Falcon Scott from Britain.

Roald Amundsen led a smaller group, and reached the South Pole first on December 14th, 1911 (Scott arrives five weeks later). Amundsen had a smaller, more agile group- and he left at midnight from Norway.

He also told everyone that he was going to the North Pole.

Using some misdirection can help you gain an advantage, but that’s not the case when it comes to your credit score.

Your FICO credit score is a critically important number, because the score impacts your ability to borrow, and the interest rate you’re charged on a debt. If you don’t understand how your credit history is scored, you can damage your credit rating.

The rules used to calculate your credit score changed in 2019, and the process may have a big impact on your personal finances. This discussion explains how to raise your credit score.

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What’s in My Credit Report?

myFICO.com is a great website that explains how a credit score is computed, and FICO stands for Fair Isaac Corporation. Most large lenders make credit decisions based, in part, on the borrower’s FICO score, and the calculation is driven by information provided by credit reporting agencies.

How to improve credit score results

Here are some items that will hurt your credit rating:

• Late payments
• Too many forms of credit open at once (multiple credit cards, for example)
• Applying for credit too often

Keep these factors in mind as you make spending decisions, because a poor credit history will make it more expensive to borrow money. Use this information to change how you spend, and improve your credit score.

 

What Changed in 2019?

The Wall Street Journal explains how the FICO score calculation changed in 2019:

• Boost loan approvals: “The new score, in the works for years, is FICO’s latest answer to lenders who after years of mostly cautious lending are seeking ways to boost loan approvals.”

 

• The UltraFICO Score: This is a new score is “designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.” (Bold italic added)

 

• An “Appeal Process”: Think of the new score as an appeals process for your credit. “If an applicant’s traditional FICO score falls short, a lender can offer to have the score recalculated to reflect banking activity. Would-be borrowers with at least several hundred dollars in their accounts, who have had the accounts for a while and who transact frequently and don’t overdraw are likely to see their scores rise, FICO said.”

The bottom line on ways to improve credit score reports: if you maintain a cash balance in the bank, reconcile your bank account promptly each month, and avoid overdrafts, the new scoring system can help you get better credit terms on loans.

Managing Business Credit

If you’re a business owner, you need to know your business credit score. Owners need to understand and improve their credit score, in order to borrow money and to find vendors who are willing to sell them products and services. Invest the time to create a business budget with cash flow assumptions.

Your business credit is just as important as your personal credit score, so work on strategies on how to improve credit rating at home and in business.

Understanding Credit Myths

The MyFICO blog also points out some credit myths:

• Medical debt: Keep in mind that medical debt will impact your FICO score- just as other forms of debt.

• Level of indebtedness: The blog points out that you don’t need to have a large amount of debt to build credit- just a reasonable amount of debt (see more on this topic below).

• Requirement to report credit activity: Currently, there is no law requiring banks, credit card companies or other lenders to report activity to credit reporting agencies. What is required is that the data they report is accurate. If you have positive credit data (such as paying off a debt), you can request that your lender report the activity to the credit bureaus.

Not borrowing will keep my score high

You need to borrow money responsibly and pay it back on time to build a credit history. Create a personal monthly budget for yourself, and include loan payments in that budget. Make sure any loan you take out fits into your monthly budget.

FICO needs data from a credit bureau (credit reporting agency) to generate a FICO score. In order for a credit score to be calculated, you need to have at least one account (loan, credit card) open for 6 months or longer. At least one account needs to be reported to a credit bureau within the last six months.

If you borrow money and pay it back on time repeatedly, you’ll build a solid credit history.

Information submitted by credit reporting agencies is always accurate

Credit information may be incorrect or incomplete, so make sure that you review your credit report data periodically. The three credit reporting bureaus are Equifax, Transunion and Experian. Verify that the information reported by each creditor (bank, credit card company) is correct.

Call the reporting agency and check their website to find out how to make corrections. If the reporting agency is resistant, contact a consumer credit firm. These firms can help you get the matter resolved.

I can’t improve my credit score 

Yes, you can. By borrowing money responsibly, the credit bureaus will report favorable information to FICO. As a result, your FICO score can increase, and a better FICO score means a better credit rating.

Use these tips to build a credit history and improve your credit score. A better credit score makes borrowing much easier- and less expensive. Smart choices about credit can make a huge difference for you over the long term.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(website) https://www.accountingaccidentally.com/

(email) ken@stltest.net

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Markus Trienke, passionate runners